Personal FinanceREI

Sunny Burns and the Quest for a Frugal, Fantastic, Financially-Independent Future

This is the story of how we – a family of four on one income – house-hacked our way from $0 to $1million in real-estate in less than 2-years, and how just two houses bring in $100k/year in gross rents.

Our Two Properties

Today we closed on our second Investment-Rental-Property. A 3-Family home in North-Arlington, NJ; 15 minutes from NYC. We bought it for $350,000 and it appraised for $370,000(Low in my opinion).

Our first home and first ever real estate purchase was a 4-family home in Garfield NJ; also 15 minutes from NYC. We bought it in October 2015 for $430,000; last month it appraised for $630,000.

Together with the two properties, we own $1,000,000 in real-estate. Which is pretty cool, especially considering that we didn’t own a single piece of property just two years ago. When I say we, it is me and my wife. We are a team.

So the million figure is really cool, but what is really awesome is the cashflow from the rentals.

So we have a total of 7 units; 4x 3-bedroom Units in Garfield, and 2x 2-bedrooms and 1x 1-bedroom in North Arlington.

 

The $8350/Month Club

I recently made it a goal for myself to join the $8,350 a month club… that equates to $100,000 annually.

 

Currently, we live in one of the units in Garfield, and our In-laws live in another so here is how the rents breakdown:

Unit 1(3bdrm): $0/month

Unit 2(3bdrm): $1000/month

Unit 3(3bdrm): $1710/month

Unit 4(3bdrm): $1700/month

Total: $4410/month

 

In North Arlington, the 3rd unit is currently vacant, and the other 2 units are paying $1200/month, which is far below market rents. Below is what I plan to rent out the units for once leases expire, etc:

Unit 1(2bdrm): $1500/month

Unit 2(2bdrm): $1500/month

Unit 3(1bdrm): $1200/month

Total: $4200/month

 

So together that’s $8610/month in gross rents, well passed my goal, so with just these two properties, we should be able to get over $100,000 in passive rental income and keep in mind that includes us living in one of the units for FREE!

Of course, there are major expenses to consider, things like Mortgage, Home Insurance, Property  Taxes, Vacancy Considerations, Maintenance.

 

Property Expenses

Garfield (Quadplex) Annual Expenses:

Mortgage 3.49%: $24,216($2,018/month)

Property-Taxes: $11,181

Insurance: $1,581

Utilities: $3,000

Vacancy+Maintenace: EST $3,500

Total Expenses: $43,478

 

North Arlington (Triplex) Annual Expenses:

Mortgage 3.875%: $15,792 ($1,316/month)

Property-Taxes: $13,672

Insurance: $1,112

Utilities: $2,000

Vacancy+Maintenace: EST $3,000

Total Expenses: $35,576

 

Total Yearly Expenses for Both Properties: $79,054

 

How we can Retire with just these Two Properties

Subtract the total expenses from the $100,000 and you are looking at $20,946/year or $1,745/month. Not super extravagant, but decent and we still get to live in one of the units for free!

But what if we paid down the mortgage… the total expenses minus the mortgage is $37,446, subtract that from the $100,000 and you get $60,954/year or $5,080/month. That with our frugal lifestyle means we could actually live off the income, especially considering that our housing costs are covered by living in one of the units.

 

Ambition or a Simple Life?

Now the dilemma… do we strive for more and keep buying properties, expanding our income but also our expenses, and making our life a little more complicated, but perhaps greater? Or do we want to just live simply… keep the income the same and just lower our expenses. Once that mortgage payment is gone we are in essence financially independent.

 

Early Retirement through Real-Estate alone

I calculated using my Financial-Spreadsheet – assuming the $100,000 in rent – that our annual savings rate after all expenses is $53,722. After maxing out my 401k($18k) and our IRA(2x $5.5k), that still leaves $24,722 in excess to put towards our mortgage. I would focus on paying down the smaller one first… $280,000(North Arlington Triplex), so that would take 7.75 years. Once that was paid off, I would continue to contribute the same amount + the $1,316 I was paying towards the North-Arlington Triplex mortgage to the Garfield Quadplex Mortgage and could pay that down in 6.5 years. So in total it would take 14.25 years to own the houses outright and get our after expenses, passive income checks from the rental properties of $5,080/month.

 

Dilemma

After considering this dilemma for a while, I have come to the conclusion to take the simpler frugal approach.

Although attractive, it is not my dream to build a real estate empire. When I first heard the Biggerpockets podcast and got inspired about Real Estate Investing; it wasn’t the stories of the millions that inspired me, but of those individuals who were able to run their own lives, no longer slaves to a paycheck – Masters of their own time.

I am 27 years old, with a Wife and 2-kids, and plans for 2 more kiddos. I like my federal government job as a R&D prototyping engineer for the Department of Defense. But what I like more is freedom. We’ve already gained partial freedom by purchasing that first quadplex that gave my wife the financial-freedom to quit her job as a school teacher to stay home with the Kids.

I guess my chance at freedom will come in 14 years. When I am 41.

Although if my Amazon Business or Blog takes off that could be substantially reduced. I still have my reach goal of early retirement set at the age of 28. My Wife was 28 when she retired from teaching.

 

How did we do it? FRUGALITY!

So if you’ve made it this far, you’re probably thinking good for you. How were you even able to afford these properties… Especially with 2 kids and on one government salary?

The answer is quite simple, Frugality!

When we got married in 2013, my Wife started her career as a teacher making $50k, and I started my Career as an engineer at $53k. So we were bringing in over $100k/year!

Pretty good money and both being raised in frugal families, we saved it!

 

Our Frugal Strategies

  • We lived at home, paying my parents $500/month
  • We packed our own lunches to work
  • Lived off a cash-budget of $450/month in out-of-pocket expenses
  • Cut our own hair at home
  • Rarely went out to eat
  • We re-sell unwanted things and clutter
  • Don’t pay for Cable TV or even own a TV
  • We don’t drink Alcohol or Coffee
  • Bought everything used off eBay, Craigslist, or Garage Sales
  • Travel for free/cheap via Travel-Hacking and don’t fall for tourist-trips 
  • Pay less than $20/month each for our Cell-phone Service. (T-mobile Unlimited Family plan of 8)
  • Bought reliable used cars – Honda Fit($3000) for her, Yaris($5000) for me
  • Didn’t collect massive amounts of Student Debt, got scholarships, and worked through college even while taking 23 credit semesters

 

So by the time 2015 hit we had over $100,000 saved up, we were ready with a down payment and money for renovations.

 

BRRR and Finances of the Purchases

That first quadplex in Garfield which we bought in October of 2015, we got a conventional mortgage with 10% down with no PMI. Purchase Price was $430,000. So we had to put a $43,000 down payment.

Over a period of about 6 months, we put another $25,000 into it.

We then filed for a cash-out refinance, and the property appraised at $550,000! A $120,000 increase from when we bought it half a year earlier. We pulled out $67,000 of that equity in cold-hard cash. Pretty much dollar for dollar returning all our investment money.

We then put in another $15,000 of work really beautifying the unit we would be living in.

Then we decided to apply for a Home Equity Line of Credit(HELOC) on the property, and this time about a year after we bought it, it appraised for $630,000! $200,000 over what we bought it for!

We got approved for a Credit-Line of $61,500

 

So just to make it clear, we already took out $67,000 in cash, and now also have available to us $63,000 in a line of credit at a low 2.49% interest rate.

 

It was at that point that we seriously began searching for Property Number 2!

As you can see, we didn’t need to save again for that second property, the first property we purchased funded that deal.

It’s really a simple formula called BRRR, I believe Brandon Turner coined that one. Buy, Renovate, Refinance, Repeat!

And that’s exactly what we are doing with this second property.

 

Formula for Success

So there you have it, our formula for success. It’s not rocket science, but it does take a tremendous amount of discipline!

But as you can see in just shy of two years we were able to acquire $1 million dollars in real estate! $630,000 appraised Garfield Quadplex, and $370,000 appraised North-Arlington Triplex.

The Fam

And we had every excuse in the book to play it safe, by the time we had bought that first property we already had a 6-month-old son, and my Wife was on an extended maternity leave. So just one income! and she never went back to work and we now have another son! and we are still able to keep doing this!

Plan smart, keep learning, persist, live below your means, and know that you can do this!

 

Special Thanks

I just wanted to give a big thank-you to Biggerpockets, my life would have been a very different story if I hadn’t stumbled on the podcast all those years ago.

I write this story as hopefully a means to inspire others towards freedom.

If you liked this story and want to hear an even more in depth detail of all our Entrepreneurial Ventures that wasn’t covered here, check out my Before The Millions Podcast Interview. I promise that you won’t be disappointed.

8 thoughts on “Sunny Burns and the Quest for a Frugal, Fantastic, Financially-Independent Future

  1. What an inspiring story SK. A story of discipline, sacrifice and success. You’ve developed a high comfort level towards risk. That’ll take you places. You’ve already been thinking about whether you want to pay off your investments and coast or keep going to “build an empire”
    That’s good. Just be open to whatever passion God puts in your heart and follow it. Remember God thinks BIG. He’s got plans for our lives. I’ve always tried to stay out of His way Haha.

  2. Amazing!
    Just attended a BP event hosted by Darren Sager in Manhattan last night and seeing folks complain about the market and you buying a 3-Plex is simply beautiful.
    Congrats!

    1. Yep we’ve gone to those. Yea the market is definitely rough, investors bidding up properties everywhere. Just got to get creative, that’s why I started searching on craigslist, and was about to start knocking on doors mailing owners, but then I stumbled on this FSBO.

  3. Hi Sunny,
    Great information, full of details. Do appreciate it! Question, what internet service do you personally use? I’m looking at options. Also, do you have cable, if not, what would you recommend?

    1. Hey Brad, my In-Laws upstairs in Unit 2 have Fios, and I pay them $30/month to use that. Cable? Meaning tv? We don’t own a tv, but occasionally we will watch something off our laptop after the kids fall asleep, and we just watch Netflix, off my Dad’s account.

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